Middle Market Digest-The Midwest

CHICAGO—A couple of stories from this week are good examples of the current ebb and flow of the region’s real estate market. On the ebb side are several developments in the world of retail. Sears announced it would continue shrinking the number of office employees at its Hoffman Estates headquarters. Hundreds were laid off recently, but officials from the iconic retail giant say they need to make additional cuts. And if that were not enough, Macy’s recently said it was considering shrinking its footprint within the company’s flagship store on State St. But that latter story also shows that amidst the decline of traditional retail, other sectors in Chicago continue to exhibit strength. One of the possibilities that Macy’s will explore involves transforming a portion of the State St. store into class A creative offices, much as it did with its historic outpost in downtown Seattle. Considering the steady flow of suburban firms into the CBD, it’s not difficult to imagine offices in Chicago’s Macy’s attracting tenants willing to pay top dollar. That’s one reason landlords and developers are so bullish on the CBD. Willis Tower, for example, just secured the National Restaurant Association as a new tenant, a sign that the $500 million makeover of Sears’ former headquarters will be a success. And a group of developers just paid $65 million to acquire a few underutilized acres in Fulton Market, now home to Google and many other rising firms. Therefore, even though many of companies that once epitomized American retail are in retreat, developers in the office market are setting the stage to attract new blood.

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